Dear Tim,

I don’t remember why I bought Ian Stewart’s Letters to a Young Mathematicianthe research puzzle | This series (see the linked index) was triggered by reading the book. a few years ago, but I’m glad I finally got around to reading it.  I started college as a math major (in that first, failed attempt that I’ve joked about), and I wonder if I’d had a mentor like Stewart I would have kept at it.

While math was always easy and fun for me, I never made it very far into the theoretical wonders of the subject.  Knowing “my figures,” as they used to say, helped when it came to financial statement arithmetic and “bond math,” but I stopped short of developing the kind of mathematical chops that would have qualified me to be a financial engineer on Wall Street.

Stewart’s book had some references that linked his world to mine.  Of course, Fibonacci showed up, since math folks gravitate to him and his numbers just as technical analysts and their charts do.  And Stewart wrote a little about some “new areas of math . . . inspired by questions in the real world,” which included fractals, chaos theory, and complex systems — all topics for theorists of the workings of economies and markets.  In fact, as an example of one, he wrote, “Complex systems model the interactions of large numbers of relatively simple entities, such as traders in the stock market.”  While I don’t often think of myself as a simple entity, he’s right.

Reading the book, I noticed how Stewart piqued my interest through the history, people, and ideas of mathematics, and by doing so gave me a glimpse of theoretical concepts well beyond my ken.  Similarly, to understand the workings of the investment markets — or to communicate about them with others — a focus on history, people, and ideas can be remarkably enlightening.

Consequently, books with those topics are good for after-hours reading, along with a mix of works from other disciplines for inspiration and insight.  You’ll probably find relatively few “how to” books and articles that teach you much more than you already know, other than those that help you learn about parts of the market ecosystem that you don’t touch at work.  And, by all means, don’t waste your time or money on books by pundits intent on telling you what the future will bring or what the next great investment will be.

While I have written many cautionary pieces about guru worship,the research puzzle | Here are a few of them. I agree with Stewart’s advice:  “Study the tactics and strategies of the great practitioners of the past and present.  Observe, analyze, learn, and internalize.”  To his words I would add, “Then, don’t copy, but create.”  It is important to build on the work of others, whether by reading about great investors or, if you are lucky, by meeting or working with them.  But look at their mistakes as closely as their victories, and use their insights and advice not as an endpoint, but as a beginning — as inspired teaching rather than divine truth.

You are at the start of a great journey.  Your impressive technical training and the almost-vertical learning curve of practical knowledge that you’ll be riding during the next few months will likely foster an interest in the big investment ideas that are out there.  Take time to dig into the history and norms that underpin them.  And learn from your elders, the recognized market icons as well as those with whom you work (more about them in a future letter).  As you do, you will feel the gravitational pull of different points of view, and somehow you will need to find your own.  You have the smarts and you have the work ethic, so you’ll pick up the game in a hurry, but if you are to be a wise man of the investment world, you’ll need independence, objectivity, and discernment.

You won’t believe how hard they are to muster.

Later,

tom